Andhra Bank Directors Report.

DIRECTORS REPORT: We place before you the Annual Report of the Bank together with the audited Statement of Accounts and Auditors

Report for the financial year ended March 31,2019.

MANAGEMENTS DISCUSSION & ANALYSIS

MACRO ECONOMIC DEVELOPMENTS: During the FY 2018-19, Indian economic growth moved in tandem with world economy, accelerated in the first half of the year and lost momentum in the second half. Global economic growth remained resilient in the first two quarters of FY 2018-19 and is moderated in the subsequent quarters. Industrial activity and trade decelerated, affecting the investor sentiment and equity prices. Economic activity also slowed down in some major emerging market economies (EMEs) owing to softening external demand, tighter external financing conditions, and heightened policy uncertainties. Downside risks predominate, with the possibility of financial stress leading to further deterioration in activity in EMDEs. Escalating trade tensions involving major economies spread globally, limiting the Fiscal space is particularly in countries with high foreign-currency denominated debt. Inflation continued to remain low in major AES.

^e Indian economy started the fiscal year 2018-19 with a healthy 8.2 percent growth in the first quarter on the back of domestic resilience. Growth eased to 7.3 percent in the subsequent quarter and further moderated in the subsequent quarters due to rising global volatility, largely from financial volatility, normalized monetary policy in advanced economies, externalities from trade disputes, and investment rerouting. The effects of the aforementioned external shocks were contained in part by Indias strong macroeconomic fundamentals and policy changes (including amendments to the policy/code related to insolvency and bankruptcy, bank recapitalization, and foreign direct investment).Inflation remained contained. The Central Statistics Office (CSO) released the second advance estimates (FAE) for 2018-19, placing Indias real gross domestic product (GDP) growth at 7.0 per cent and growth of real gross value added (GVA) at 6.8 per cent. The SAE for 2018-19 featured an acceleration in gross fixed capital formation (GFCF) and consumption expenditure (both private and government). Gross fixed capital formation (GFCF) is expected to register growth rate of 12.4 percent at Current Prices supported primarily by the governments thrust on the road sector and affordable housing. The uptick in Gross Fixed Capital Formation coupled with the recent decline in crude oil prices bodes well for a sustained growth, going forward.

Monetary and Liquidity Conditions : During the financial year 2018-19, Reserve Bank of India (RBI) maintained the stance of monetary policy as neutral in the first three bimonthly policies, changed it to calibrated tightening in the month of October and subsequently to neutral in in the month of February 2018 in consonance with the objective of achieving medium term target for CPI inflation of 4%. The Average CPI inflation rate increased to 3.4% during FY 2018-19 from 3.3% in FY 2017-18. RBI has increased repo rates by 25 bps to 6.25% in June 2018 and again by 25 bps to 6.50% in October 2018. Subsequently the rate was reduced to 6.25 % in February 2019. Tight liquidity conditions prevailed for the major part of the year. This has led to firming of interest rates on the deposits and impacting the cost of funds for the Banking industry.

Balance of Payments and External Sector: Indias current account deficit widened to USD 16.9 billion, or 2.5 percent of the GDP from USD 13.7 billion or 2.1 percent of the GDP a year earlier. The goods deficit increased to USD 49.5 billion from USD 44 billion a year ago as imports rose 9 percent while exports went up at a softer 7.2 percent on account of weakening external demand conditions. April to March 2018-19, the trade gap widened to USD 176.42 billion from USD 162.05 billion in the same period of the previous fiscal year. Indias foreign exchange reserves were at US$ 412.9 billion on March 31, 2019. The low level of inflation in advanced economies and the delay or postponement of rate hikes by major advanced economies will aid to augur well to the investment flows into the economy.

Financial Markets (Equity) : Despite several challenges including the liquidity crisis in the domestic non-banking financial companies (NBFCs), global trade tensions and high international crude oil prices, the rupee faltering to new record lows against the dollar, the Indian equities market emerged as one of the best performers globally in 2018-19. The BSE Sensex rose nearly 17 per cent during in the financial year 2018-19, while the National Stock Exchanges Nifty50 increased 15 per cent. On a sectoral basis, the banking, energy and IT sectors outperformed with a growth of 25 per cent followed by FMCG at 16 per cent and pharma at 12 per cent. The laggards were led by media, auto and telecom sectors, which declined 24 per cent, 23 per cent and 22 per cent respectively. Recapitalisation of state-run banks, eventual easing of liquidity concerns, and a sustained rise in foreign fund inflows were the amongst the major boost for the market

Bond Markets : Hike in rates by the US Federal Reserve, depreciating rupee, rise in crude oil prices, worsening current account deficit, concerns over fiscal deficit and current account deficit target, coupled with trade tiff between the US and China dampened the mood in emerging markets as macroeconomic headwinds weighed on investor sentiment through the year. The yield curve has undergone level shifts in H1:2018-19 in response to global spillovers as well as domestic factors such as near-term inflation outlook and monetary policy measures (Chart IV.9). The rate hike of June resulted in a parallel upward shift in the yield curve, especially in the 2-year to 16-year segment, while the August rate hike induced a downward shift, in line with softening crude oil prices. Further, in H2: 2018-19 also the yield curve underwent a level shift in response to both global spillovers and domestic factors such as lower crude oil prices, moderation in the domestic inflation outlook, monetary policy measures and shift in the stance. The 10-year benchmark yield hovered from 7.40% to a peak of 8.00% and returned to the level of 7.35% by the end of FY 2018-19.

Trends in Banking Industry: After a prolonged period of stress, the banking sector appears to be on course to recovery as the load of impaired assets recedes; the first half-yearly decline in gross NPA ratio since September 2015 and improving Provision Coverage Ratio, being positive signals. Notwithstanding the significant costs wrought by the enhanced recognition of asset impairment in Public Sector Banks (PSBs), it appears to have led to a greater discipline in credit assessment, higher sensitivity to market risk and better appreciation of operational risks. The overall credit growth for the financial year 2018-19 was higher at 13.24% as compared to 10.3 % in 2017-18. Demand has grown for both corporate & retail loans; particularly the services, consumer durables & agriculture allied sectors, industrial credit have led the growth in credit. Credit to the infrastructure, chemical and chemical products, and all engineering sectors accelerated. However, credit growth to basic metal & metal products, textiles, and food processing decelerated. The deposits of the banking system witnessed growth of 10.03% during 2018-19 as compared to 6.7% during the last financial year.

OUTLOOK: Indias GDP is estimated to have increased 7.2 per cent in 2017-18 and 7 per cent in 2018-19 as per advance estimates of the Central Statistical Office. The economy is projected to grow at the rate of 7.5% during 2019, expanding further to 7.7% during 2020 as per the International Monetary Fund (IMF) World Economic Outlook January update. The growth rates for the economy are pegged much higher than the global growth rates for the same years, at 3.5% and 3.6% for 2019 and 2020 respectively, thus placing the economy on a solid footing even amidst growing global uncertainties. The improving macroeconomic fundamentals have further been supported by the implementation of reform measures, which has helped foster an environment to boost investments and ease banking sector concerns. Together, these augur well for a healthy growth path for the economy. Public sector banks having received capital support from the Government in the form of re-capitalization bonds are well positioned to tap the improved opportunities in terms of credit growth.

PERFORMANCE HIGHLIGHTS OF THE BANK

Business: For the financial year ended 31st March 2019, Banks Business stood at Rs. 3,98,511 Crore recording an increase of Rs 25,906 Crore from Rs 3,72,605 Crore as on 31.03.2018, with a growth rate of 6.95% (y-o-y).

Deposits: Banks Total Deposits stood Rs. 2,19,821 Crore at as on 31.03.2019, recording an incremental growth of Rs 11,751 Crore (5.65%) over the previous year level of Rs.2,08,070 Crore. The share of CASA deposits (Current and Savings) in Total Deposits stood at 31.39%.

• Current Deposits stood at Rs. 10,230 Crore as on 31.03.2019 as compared to Rs. 10,360 Crore as on 31.03.2018.

• Savings Bank Deposits increased to Rs. 58,768 Crore as on 31.03.2019, from Rs.54,236 Crore as on 31.03.2018, growing at a rate of 8.36%.

• Term Deposits increased from Rs.1,43,474 Crore as on 31.03.2018 to Rs.1,50,823 Crore as on 31.03.2019, registering a growth rate of 5.12%.

Advances: Gross Bank Credit increased by 8.60% from Rs.1,64,535 Crore as on 31.03.2018 to Rs. 1,78,690 Crore as on 31.03.2019.

• Credit to Agriculture Sector (including RIDF & non priority) stood at Rs. 36,961 Crore as on 31.03.2019 as against Rs. 30,844 Crore as on 31.03.2018 registering a growth rate of 19.83%.

• MSME portfolio registered a growth of 5.43% YOY basis from Rs. 31,183 Cr to Rs. 32,876 Cr

• Retail Credit portfolio registered a growth of 5.15% YoY from Rs. 38,979 Cr. to Rs. 40,985 Cr

Classification of Advances portfolio (Rs. in Crore)

Category 31.03.18 31.03.19 Variance
1. Food Credit 825 834 1.09%
2. Non - Food Credit (2.1 to 2.4) 163710 177856 8.64%
2.1 Agricultural Advances 30844 36961 19.83%
2.2 Advances to MSME Sector 31183 32876 5.43%
2.3 Retail Credit (incl. DLs) 38979 40985 5.15%
2.4 Large Industries & Other Advances 62,704 67034 6.91%
GROSS BANK CREDIT (1+2) 164535 178690 8.60%
Of which, Lending to Priority sector 70121 78318 11.69%

Area-wise distribution of Aggregate Deposits & Advances as on 31.03.2019 is set forth in the following Table. (Rs. in Crore)

Sl.

No.

Category of Branches Deposits

31.03.19

% to total Advances

31.03.19

% to total
1 Rural 15645 7.12% 21420 11.99%
2 Semi - Urban 28718 13.07% 28072 15.71%
3 Urban 47204 21.48% 29604 16.57%
4 Metro 128225 58.34% 99593 55.73%
5 TOTAL (1+2+3+4) 219792 100.00% 178690 100.00%

Profitability :

Total Income for the financial year 2018-19 of the bank stood at Rs. 20,977 Cr as compared to Rs. 20,347 Cr for FY 2017-18. The Non interest income of the bank stood at Rs. 2045 Cr. Operating Profit of the Bank stood at Rs.5023 Cr compared to Rs.5361 Crore in th previous year. However, on account of higher provisioning towards ageing of NPAs, the Bank incurred a Net Loss of Rs. 2786 Cr for FY 2018-19 as compared to Net Loss of Rs. 3412 Cr for FY 2017-18. The Total interest income of the Bank stood at Rs. 18,932 cr as compared to Rs. 17974 Cr of the previous year. Of this, Interest Income from Advances registered an increase by 8.44% from Rs.13069 Cr during 2017 18 to Rs. 14,173 Cr in 2018-19. Interest Income from investments stood at Rs. 4,672 Cr in 2018-19. Total Expenses during the financial year 2018-19 is Rs. 15,954 Cr against Rs.14985 Crore registered during the previous year. The interest expenditure increased by 5.02 % from Rs.11,640 Cr in 2017-18 to Rs. 12,224 Cr in 2018-19. The , Operating Expenses stood at Rs.3,730 Crore, registering an increase of 11.48% over the previous year.

Highlights of Revenue, Expenditure and Profitability

(Rs. in Crore)

2017-18 2018-19 Abs Gr % Gr
Total Interest Income 17974.54 18932.22 957.68 5.33%
Total Interest Expenditure 11639.79 12223.99 584.20 5.02%
Net Interest Income 6334.75 6708.23 373.48 5.90%
Other Income 2372.07 2045.04 - 327.03 - 13.79%
Profit on sale of Investments 489.36 83.72 - 405.64 - 82.89%
Core Other Income 1882.71 1961.32 78.61 4.18%
Operating Expenses 3345.79 3730.15 384.36 11.49%
Operating Profit 5361.03 5023.12 - 337.91 - 6.30%
Provisions and Contingencies 8773.56 7809.24 - 964.32 - 10.99%
Net Profit - 3412.53 -2786.12 626.41 - 18.36%

APPROPRIATIONS: After making various provisions, the net loss for the year 2018-19 has been arrived at Rs.2786.12 Cr. Brought forward balance in P/L Account is -Rs.3463.08 Cr. The appropriations are given below

Appropriations (Rs. in Crore) 2017-18 2018-19
Appropriation out of Net Profit - 3412.53 - 2786.12
Balance brought forward 1.53 - 3463.08
Transfer to Statutory Reserves 13.02 0.98
Transfer to Capital Reserve 39.07 2.94
Transfer to Revenue Reserves 0 0
Transfer to Special Reserve 0 0
Transfer to proposed Dividend (incl. Dividend Tax) 0 0
Profit carried over to Balance Sheet - 3463.09 -6253.12

KEY FINANCIAL RATIOS : Net Interest Margin (NIM) stood at 3.31 % compared to 3.33% in the previous year. Cost to Income Ratio stood at 42.61% as compared to 38.43% for the previous year. Earnings per Share (EPS) stood at Rs. -19.01 and Book Value per Share (BVPS) stood at Rs.34.29. Gross Non-Performing Assets to Gross Advances stood at 16.21% and Net Non-Performing Assets to Net Advances stood at 5.73% for the financial year ended 31.03.2019 Key Financial Ratios

Parameter 31.03.2018 31.03.2019
Yield on Advances (%) 8.84% 8.54%
Cost of Deposits (%) 5.57% 5.53%
Net Interest Margin (%) 3.33% 3.31%
Yield on Funds (%) 7.71% 7.44%
Cost of Funds (%) 4.99% 4.80%
Cost - to - income Ratio (%) 38.43% 42.61%
CRAR - Basel III (%) 11.00% 13.68%
Return on Assets (%) - 1.46% -1.09%
Earnings Per Share (Rs.) -38.94 -19.01
Book Value Per Share (Rs.) 60.25 34.29
Net NPA (%) 8.48% 5.73%
Gross NPAs (%) 17.09% 16.21%

CAPITAL & NET WORTH

(Rs. in Crore)

Parameter 31.03.2018 31.03.2019
Equity Capital 1199 2884.49
Reserves Surplus 9619 10280.64
Net worth of the Bank (Tangible) 7223 9889.48

Return on Networth : Return on Networth has improved to -0.28 as on 31.03.2019 from -0.47 as on 31.03.2018. Reasons for change are as under:

a) Reduction in year - on - year loss from Rs. 3,412.53 Crores for FY 2017-18 to Rs. 2,786.13 Crores for FY 2018-19

b) Infusion of Capital of Rs. 2,019.00 Crores on 11.10.2018 and Rs. 3,256.00 Crores on 28.03.2019 by Government of India.

c) Draw down from Statutory Reserve towards interest of Additional Tier-I Perpetual Basel III Compliant bonds by an amount of Rs. 280.53 Crores during the year ended 31.03.2019.

Operating Profit Margin (%) and Net Profit Mrgin (%) : There are no significant changes in Operating Profit Margin (%) and Net Profit Margin (%) as compared to the immediately previous financial year.

CAPITAL ADEQUACY: As per the guidelines issued by Reserve Bank of India, the start date for implementation of Basel III guidelines in India is with effect from April 1,2013. Accordingly, the Bank has been assessing its Capital Adequacy as per Basel III prescriptions. The total Capital Funds of the Bank are at Rs.18, 384.66 Cr as on March 31,2019 (Pre-audit) and the Capital Adequacy Ratio at 13.01% is above the required RBI prescribed norm of 10.875%. The Bank has put in place an "Internal Capital Adequacy Assessment Process" (ICAAP) for assessing the adequacy of Capital levels keeping in view the expected increase in business levels and enhanced Capital requirements in the Basel III regime. The assessment process also includes a framework for inclusion of Pillar-II risks under Basel-III guidelines, such as Credit concentration risk, interest rate risk in the banking book, liquidity risk, etc.

CRAR Position 31st March 2019 (Basel III)
CET1 8.42%
AT1 1.96%
Total Tier-I 10.38%
Tier-II 3.30%
Total CRAR 13.68%

Priority Sector advances of the bank stood at Rs.78318 Crore and registered a growth of 11.69% (Y-O-Y) as on 31.03.2019. The absolute increase over March. 2018 is Rs. 8197 Crore. Total Priority sector advances net of PSLC (Priority Sector Lending Certificates) is Rs.62742 Cr Bank has made net sale of Rs. 17475 Cr PSLC General / SF-MF through e-kuber portal of RBI and earned a premium / commission from PSLCs /IBPCs for Rs.133.50 Cr during the FY 2018-19.

Priority Sector Lending

(Rs.in Crore)

Category 2018-19
1.Priority Sector Advances (2 to 7) 78318
2. Agriculture - Priority (2.1 + 2.2) 33725
2.1 Agriculture Loans - Priority 32937
2.2 Eligible Investments (RIDF) 788
3.Micro, Small and Medium Enterprises 32876
4.Educational Loans 1190
5. Housing Loans (includes Indirect Finance& Inv, in NHB) 10487
5.1 Eligible Investment in NHB 199
6. Social Infrastructure 12
7.Renewal energy and others 28
8.Priority Sector Advances (net of PSLC) 62743
8.1 PSLC Sales (General + SF/MF) 17475
8.2 Purchase of Micro Enterprises 1900
9.Agriculture - Priority (net of PSLC) 25850
9.1 IBPC & PSLC Sales (SF/MF) / Agri 8875
10. NPA under Agri Credit 1719
10.1 NPA under Agri. as on 31.03.18 (% to Gross Agri.adv.) 4.11

 

Statutory Priority Sector Targets / Sub Targets and their Achievements : (Yearly). Targets Achievements
I.Priority Sector Advances (% to ANBC) 40.00 42.97%
II.Agricultural Credit (% to ANBC) 18.00 18.62%
III.Small & Marginal Farmers (% to ANBC) 8.00 10.62%
IV. Direct Lending to Non-Corporate farmers (% to ANBC) 11.99 14.19%
V. Weaker Section Advances (% to ANBC) 10.00 13.33%

• Credit to Agriculture-Priority: Agricultural advances (Agri-Priority) of the bank stood at Rs. 33725 Crore at the end of March. 2019, registering a growth rate of 13.80 % (Y-O-Y). The absolute increase over March 2018 is Rs. 4088 Crore. Agri. Priority advances (after net sale of PSLC SF/MF & PSLC-Agri of Rs.7875 Cr) are at Rs.25850 Cr.

• Lending to Small & Marginal Farmers: Loans to Small & Marginal Farmers as on 31.03.2019 was Rs.14691 Cr (after net sale of Rs.8375 Crs under PSLC SF/MF)

• Lending to Self Help Groups: Bank has extended financial assistance to 237415 Self Help Groups (SHGs) with total exposure of Rs.7559 Crore as on 31.03.2019.

• Credit to Women Beneficiaries: Total credit extended to women beneficiaries as on 31.03.2019 was at Rs. 25096 Cr i.e., 15.22 % of Net Bank Credit as against norm of 5%.

• Credit to Weaker Sections: Advances to Weaker sections (after net sale of Rs.8375 Cr under PSLC SF/MF) stood at Rs.19048 Crore.

• Credit to Minorities : As on 31.03.2019, bank is having 335 branches in Minority dominated Districts. Of the Banks total network across the country, the percentage of Branches in minority dominated Districts stood at 8.10 % (i.e., Rs 6357 Crs) as on 31.03.2019.

Credit to MSME Sector

Parameter (Rs in crore) 31.03.18 31.03.19 YOY Gr%
Micro 11138.13 11958.68 7.37%
Micro & Small Enterprises 23059.08 24628.83 6.81%
Total MSME 31183.00 32876.40 5.43%

• During the year, 179595 MUDRA loans are sanctioned with aggregate total limit of Rs.3007.62 crores and an amount of Rs.2740.38 crores is disbursed. Bank has since customized the MUDRA Loan processing in LAPS (Lending Automation Processing System) Module for reducing TAT.

• During 2018-19, 757 applications were sanctioned with a limit of Rs.183.66 crores under Stand Up India. The cumulative performance is 6758 sanctions with a limit of Rs.1217.83 crores.

• Bank has since on boarded RXIL TReDS platform as financier for online bill discounting of MSME Units.

• Bank has since on boarded PSB Loans in 59 minutes portal and has sanctioned 333 accounts amounting to Rs.110.28 Crs. as on 31.03.2019

• Presently 9 SME Expresses are functioning at various Centres for scouting the new business and for reducing the TAT. 559 Branches are attached to SME Expresses and catering the various needs of MSME borrowers.

• Entered into MOU with M/s APEPDCL for financing Solar Roof Top Units in Visakhapatnam District of Andhra Pradesh.

• Identified 389 clusters were allotted to 240 Branches for focused approach and towards growth under MSME sector.

Retail Lending : The Banks Retail Credit portfolio stood at Rs. 38,979 crores as on 31.03.2018 as against Rs. 40986 crores as on 31.03.2019 with year on year growth of Rs. 2,007 Crs. The segment has registered a growth of 5.15% on YOY basis including deposit loans and credit card.

• Housing loans portfolio has increased from Rs 17,941 Crs as on 31.03.2018 to Rs. 20,105 Crs as on 31.03.2019 with an absolute growth of Rs. 2,164 crs registering a growth rate of 12.06% on yoy basis.

• Non - Agricultural Gold Loans (NAGL) portfolio has increased from Rs. 2984 Crores as on 31.03.2018 to Rs. 3,062 Crores as on

31.03.2019 with an absolute growth of Rs. 78 Crores registering a growth rate of 2.61% on yoy basis.

• Property Loans (Loan against property) Portfolio has increased from Rs. 4,912 Crores as on 31.03.2018 to Rs. 5,612 Crores as on 31.03.2019 with an absolute growth of Rs. 700 Crores registering a growth of 14.25% on yoy basis.

Advances - Industry wise Exposure : Bank has loan exposure to various sectors like Housing Loans, NBFCs, Power, Iron & Steel, textiles, etc. Exposure to top 10 industries constitutes 52.73% of previous quarter gross bank credit as on 31.03.2019, signifying a diversified loan portfolio.

Industry wise Exposure of Advances (Rs. in Crore)

Sl. No. Industry Ceilings as % of Total Advances of previous Quarter Actual Fund based exposure as on 31.03.19 Exposure as % of Total Advances of Previous Quarter i.e. 31.12.18
1 Housing Loans 18.00% 25821.19 15.01%
2 NBFC 12.00% 17026.87 9.90%
3 Power 12.00% 15093.14 8.77%
4 Construction& Contractors 5.00% 8211.29 4.77%
5 Iron & Steel 7.00% 6117.82 3.56%
6 Textiles 6.00% 5540.26 3.22%
7 Rice Mills 3.00% 4755.33 2.76%
8 Commercial Real Estates 4.00% 3147.12 1.83%
9 Engineering 3.00% 2709.41 1.57%
10 Drugs, Pharmaceuticals 5.00% 2308.59 1.34%
Total 90731.02 52.73%

INVESTMENTS : In terms of RBI guidelines, the Bank is required to invest in SLR securities to the extent of 19.25% of NDTL. Banks investment decisions are based on risk-return trade-off and bank is scrupulously following the regulatory and internal guidelines. Statutory prescriptions relating to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are complied with and being monitored on a continuous basis. Risk Management in treasury operations has been strengthened further by undertaking stress testing and back testing of the investment portfolio at quarterly intervals, besides daily monitoring of Duration and Value-at-Risk (VaR). External rating migration of the bonds and debentures portfolio is also being monitored on quarterly basis.

As on 31.03.2019, the Investments (net of depreciation) decreased by 2.81% and stood at Rs. 62953.09 Crore, down from Rs.64770.30 Crore as on 31.03.2018. SLR maintained as on 31.03.2019 was Rs. 52,502.18 Crore, which constituted 23.65% of Net Demand and Time

Liabilities (NDTL). Interest income from investments increased from Rs. 4488.43 Crore in 2017-18 to Rs. 4558.05 Crore in 2018-19. Profit on sale of investments stood at Rs. 83.72 Crore during 2018-19, while it was Rs. 489.32 Crore during 2017-18.

Classification of Investments (Rs.in Crore)

PARTICULARS 2017-18 2018-19 Var (%)
1. Government Securities 59072.74 57479.76 -2.70
2. Other Approved Securities 0.00 0.00 0.00
3. Shares 796.58 515.17 -35.33
4. Debentures & Bonds 2499.91 2512.22 0.49
5. Subsidiaries and / or Joint Ventures 357.63 359.16 0.43
6. Others 2043.44 2086.78 2.12
TOTAL (1 to 6) 64770.30 62953.09 -2.81

Strategic Investments

Joint Venture Insurance : Our Bank is having Joint venture in insurance with Bank of Baroda and Carmel Point Investments India Private Limited named "India First Life Insurance Co. Ltd". Carmel Point Investments India Private Limited acquired 26% stake from Legal & General Middle East Limited ("L&G") of UK. Our stake in the venture is 30% while Bank of Baroda holds 44% and Carmel Point Investments India Private Limited holds 26% stake. Our investment in the life insurance venture is Rs.187.50 Crore.

Banking subsidiary in Malaysia : The Bank, along with Bank of Baroda and Indian Overseas Bank, has entered into a tie up for setting up a banking subsidiary in Malaysia. The Banks stake in the venture is 25%, amounting to RM 82.50 Million (book value Rs. 143.28 Crore), in a total subscribed capital of RM 330 Million (approximately Rs. 559.02 Crore @ 1 RM = Rs. 16.94 as on 31.03.2019). The joint venture viz. INDIA INTERNATIONAL BANK (MALAYSIA) BHD commenced business on 11.07.2012.

Treasury & Forex Business : The Bank is an Authorised Dealer, to deal in foreign exchange business through 56 designated B category branches of the Bank. The Bank has speed remittance arrangements with an Exchange House (UAE Exchange LLC) based in Gulf. Systems have been put in place for management of country risk, exchange risk and other foreign exchange risks. The country risk exposures for single country risk limit and aggregate risk limits for the group of countries under each risk category are fixed and are being monitored on daily basis.

• During FY 2018-19, the Bank recorded a merchant turnover of Rs. 37,733 Cr in Forex, as compared to Rs 38,811 Cr during FY 2017-18

• During the year 2018-19, the profit on Forex transactions is Rs.308.19 Cr, when compared to Rs 397.68 Cr during the year 2017-18.

• The Bank recorded Inter-Bank turnover ofRs. 11,44,818 Cr during 2018-19,when compared to Rs. 10,14,326 Cr during 2017-18.

• Export finance of the Bank stood at Rs. 3,742 Cr. as on 31.03.2019, when compared to Rs 4,224 Cr. as on 31.03.2018.

CREDIT CARD BUSINESS : Our Bank is a Pioneer in Credit Card Business, both as Issuer and Acquirer (merchant Business) since 1981.

• Our Card base increased to 301234 as against card base of 234555 for the Year ended March 2018 showing year on year growth rate of28.43%

• The turnover of Credit Cards has increased from Rs. 1170.52 crores for the year ended March 2018 to Rs. 1690.34 Crores for the year ended March 2019 showing year on year growth rate of44.40%.

• Launched new Credit Card Mobile app "AB CreditCard on 03.10.2018 in both Android and IOS versions. As on March 2019, total 20226 users registered.

MERCHANT BANKING SERVICES

The Bank is having the following two Registrations with SEBI:

1. Debenture Trustees

2. Bankers to an Issue

The Bank is not undertaking any activities as Category -I Merchant Bankers or Debenture Trustees and Merchant Banking registration cancelled in 2017-18. The Bank is attending to the requests and redressing the grievances of the shareholders of the Bank with regard to equity and dividend related issues, in coordination with the Banks Registrars & Share Transfer Agents, M/s MCS Share Transfer Agents Limited, Mumbai.

Raising of equity capital for the Bank : During the financial year 2018-19, the Bank has raised Rs 2019 crores and Rs 3256 crores under Equity Capital from Government of India on preferential basis. The Bank has approved the scheme for raising of capital through ESPS (Employee Stock Purchase Scheme) upto Ten Crore Equity Shares. The said scheme was opened for subscription from 11.03.2019 to 20.03.2019 at a discounted price of Rs 19.26p. per share. The scheme was subscribed by 109% due to good participation by eligible employees of the bank. The said shares have been allotted during the next financial year on 24.04.2019.

Raising of Debt Capital of the Bank: During the financial year 2018-19, the Bank has not issued any debt bonds.

Rating of Debt Bonds and Certificate of Deposits borrowings of the Bank: The Bank is availing the services of M/s CARE Ratings India Limited, M/s Brickwork Ratings Pvt Limited and M/s CRISIL Limited for rating of the Debt Bonds and CD issues of the Bank.

Payment of annual interest on the debt capital raised by the Bank: The Department is making the payment of annual interest to the bondholders as on the respective due dates.

Payment of dividend on the equity shares: NIL

Holding of General Meetings: The 18th Annual General Meeting of shareholders of the Bank was held on 09.07.2018 and obtained their approval for adoption of annual accounts of the Bank for the FY ended 31.03.2018 and on raising of capital through Qualified Institutional Placement, Follow-on Public Offer, etc. Department also conducted Extra-ordinary General Meetings on 19.09.2018 for approval of shareholders for issue of shares to Government of India on preferential basis and for issuing shares to Employees of the Bank under Employee Stock Purchase Scheme and on 22.03.2019 for approving the issue of shares to Government of India on preferential basis.

Compliance with SEBI Regulations/ Guidelines and Provisions of Listing Regulations: The Bank has complied with the SEBI Regulations/ Guidelines issued from time to time. Bank has complied with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Transferring the Unpaid/Unclaimed Dividend to Investor Education and Protection Fund (IEPF): In terms of the Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Act, 2006 (which has come into force from 16.10.2006), the amount of dividend remaining unpaid or unclaimed or unencashed for a period of seven years is requested to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government under Section 125 of the Companies Act, 2013. During the FY 2018-19, the Bank has transferred unclaimed/unpaid dividend amount pertaining to the year 2010 11 to the Investor Education and Protection Fund (IEPF).

Application Supported by Blocked Amount (ASBA): SEBI vide Notification dated 10.11.2015, has mandated that all the investors applying in a public issue shall use only Application Supported by Blocked Amount (ASBA) facility for making payment. ASBA facility was enabled on August 24, 2009 through our Bank. As on March 31, 2018, all branches of the Bank across pan India were enabled to accept ASBA applications. We have also extended the facility through our Net Banking Channel where customers can bid online hassle free.

BANCASSURANCE & FEE-BASED PRODU CTS : The Bank has been constantly focusing on augmenting non-interest income through diversification of income streams by taking up marketing of life and non-life insurance products, Mutual fund products, Depository Services, Direct taxes, Commercial Taxes, Municipal Taxes, Utility payments, Payment gateway services, Auto-Debit facilities etc.

Life Insurance : The Bank along with the Bank of Baroda and Legal & General Group Plc of UK has formed a Joint venture Life Insurance Company named India First Insurance Co Ltd and it was formally launched in the month of March 2010.Now CARMEL POINT INVESTMENTS INDIA PRIVATE LIMITED has taken over the share of Legal & General Group in 2018-19. During the financial year 2018-19, total New Business premium (including Retail and Group business) of Rs.267.14 Crore was mobilized. Renewal premium of Rs. 332.65 Crore was collected upto 31.03.2019. Bank earned commission of Rs. 34.70 Crore from sale of Life Insurance Policies.

Non-Life Insurance : The Bank has tie up with M/S United India Insurance Co., Ltd & M/S Reliance General Insurance Co., Ltd for General Insurance. During the year the Bank has mobilized the premium of Rs. 75.71 Crore and earned a commission of Rs.10.58 Crore under General Insurance.

HEALTH INSURANCE: The Bank has a tie up with M/s United India Insurance Co.Ltd & M/s Cigna TTK Insurance Co Ltd for Health Insurance. During the year the Bank has mobilized the premium of Rs. 138.44 Crore and earned a commission of Rs. 19.80 Crore under Health Insurance.

Payment Gateways and Mutual Funds: The Bank is having a tie-up with 12 Payment Gateways and 12 Mutual Fund Companies. Bank has earned a commission of Rs. 1.56 Crore.

Fee Based Income: Bank has earned fee based income of Rs. 253.24 Cr

Depository Services: Bank is offering Depository Services to the public under the brand name of "AB Demat", The Bank is a Depository Participant (DP) with Central Depository Services (India) Limited (CDSL) as well as with National Securities Depository Limited (N SDL). The Bank has opened 4291 Demat a/cs and 2059 trading accounts in FY 2018-19 and earned a commission of Rs. 43.09 Lakh

IT Initiatives : During FY 2018-19 your Bank has taken the following I.T. initiatives to improve Customer Service:

Prevention of cyber frauds - The bank has enabled the feature of sending SMS alerts to customers based on analytics on customers transaction behaviour whenever there is a change in behaviour of transaction done through ATM/POS channel. The following alerts are being generated and send as of now.

• First ATM Transaction

• First POS Transaction

• ATM Transaction done after a period of 6 Months

• POS Transaction done after a period of 6 Months

Auto filling of Application forms : The Bank has enabled the feature of auto filling of online applications of the existing customers after authentication while applying for Retail Loan through the Banks online portal.

Virtual Aadhaar ID: The bank has migrated from eKYC version 2.1 to eKYC version 2.5 enabling the use of Virtual aadhaar ID to perform e-KYC transactions.

FEBA- Finacle E Banking Application - the following new features have been added during FY 2018-19:

a) Know Internet Banking personalized user-id - to enable Retail Internet Banking customers to recover their U SER ID based on OTP erification.

b) Instant Overdraft Facility against Online Term Deposit through Internet Banking is enabled for both Retail & Corporate Internet Banking customers. Further, Retail Internet banking customers can open OD against Term Deposits for accounts opened through Mobile Banking also.

c) Term Deposit opening / Closure is enabled for corporate customers. This facility was hitherto available to Retail Internet Banking Customers. Closure of Term Deposit facility is available only for the Term Deposits opened through Internet Banking.

d) ASBA for Corporate IB Customers is now enabled for Corporate IB customers also.

e) Cheque book Request facility for corporates : Corporate IB customers can now request for cheque book facility online and the requested cheque book will be delivered to customers communication address.

f) Request for personalized Rupay Debit Card : To accelerate the percentage of replacement of magnetic strip cards and to make the process of replacement of existing magnetic strip cards with EMV cards easy for customers, re-issuance of personalized Rupay Platinum Chip card is enabled through Internet Banking for Retail customers.

g) Activation of Personalized RuPay Platinum Debit Card through Internet Banking : Further to enabling of request for personalized Rupay Debit Card through IB, activation of Rupay platinum debit card is enabled through IB.

h) Blocking of Debit Card through Internet Banking : An option is provided for retail customers where-in they can block their debit card through Internet Banking. On successful validation of OTP, the debit card will be blocked. With enabling of this facility, IB now provides three debit card services for retail customers viz., request for re-issue of personalized Rupay Platinum card, activation of personalized Rupay Platinum card and blocking of debit card.

i) LPG ID linking to account : Retail Internet Banking customers can now link their LPG ID to their Bank account number through IB.

j) West Bengal Tax Payment through Internet Banking : Facility of paying West Bengal Taxes through Internet Banking is enabled by directly integrating our bank in GRIPS website.

k) Transaction password generation for corporate customers using Safe-T : Safe-T app enables Corporate & Retail Non Debit card holders to generate Transaction Password instantly.

l) Donation facility for Corporate IB Customers : Donation facility through IB is enabled for corporate customers in-line with the facility provided to retail IB customers. trough this module, customers can make donations to various trusts / temples approved by Head Office for which accounts are maintained at our branches.

m) GSTN seeding for Retail and Corporate customers : The facility for seeding GSTN to account numbers is enabled for Retail and Corporate customers through IB. System will allow to seed the GSTN only if the customers PAN is registered in Finacle. A customer can seed GSTN pertaining to different states using this functionality.

n) BBPS for Corporate Net Banking Customers and Common BHIM App : Utility Bill payments using Bharat Bill Pay services has been enabled in Net Banking for corporate customers and Common BHIM App through which the customer will be able to pay Bills for the merchants under five categories - DTH, Electricity, Gas, Water and Post Paid Mobiles

o) Interest certificate for Deposits / Savings through Internet Banking : In Internet Banking, an option is provided for both Retail and Corporate Internet Banking customers for generation of Interest Certificate for all Saving & Deposit Account linked to the Customer: Id and is available for NRE Accounts also. The report can be generated for a period of one year and can be downloaded in PDF, Excel and HTML formats.

p) Income Tax Single Signon E-Filing for Corporate Internet Banking Customers : Presently the facility of Income Tax E-filing (single Signon through Internet Banking) and generation of Form26AS is available only for Retail customers. The facility is now extended to Corporate customers availing Internet Banking.

q) Facility to register for account statement and transaction alert over email : Bank has enabled facility in Internet Banking for customers for self enrolment for receiving account e-statements and digital channel transaction alerts over email.

1. Mobile Banking App - ABTej- new features added :

a) Details of insurance : New facility has been enabled in ABTej Mobile banking app through which users will be able to view the insurance policy details of AB Health Plus Mediclaim policy, AB Arogyadan and India First Life Insurance.

b) Enabling multiple vernacular Languages for accessing the AB Tej app : In compliance of EASE guidelines, Dept., has enabled Hindi, Telugu, Tamil and Marathi Languages in addition to English in AB TEJ Mobile App. Customers can set their preferential language in AB TEJ Mobile Application at the time of login. Enabling of other vernacular languages Odiya, Kannada are under testing phase.

c) Email Updation in AB TEJ : Enabled a facility in the AB Tej app for customers to self-register customer email ID for receipt of account statement.

d) Debit Card Reissue and Activation in AB TEJ : An option is provided where-in Mobile Banking Application AB Tej users can opt for debit card reissuance and activation after receipt of the debit card.

Sukanya Samriddi Scheme -Credit through Internet Banking, ABTej & IMPS : With an objective to facilitate additional channel for paying monthly instalments for accounts opened under Sukhanya Samriddi Scheme, option has been enabled in Internet Banking, Mobile Banking (ABTej app) and through IMPS channel.

Online OTS (One Time Settlement) Platform: A new online OTS platform with end-to-end processing till repayment or recovery is introduced. Customers who want to settle the NPA online need to visit our banks website www.andhrabank.in and submit the request by clicking the "ONLINE NPA OTS" link available on the webpage and in the Online Service menu.

Customer Limited Liability: As part of "Policy on Customer Protections - Limiting Liability of Customers in Unauthorized Electronic Banking Transactions" - which is based on RBI direction on customer protection, the Bank has developed the process for sending SMS to customers with full transaction details and block the debit card automatically if customer forwards a SMS to a prescribed VMN (Virtual Mobile Number) 9298112345, if transaction is fraudulent.

NETWORK EXPANSION: During the Financial Year 2018-19, Bank opened 9 Branches and added 12 ATMs/ BNAs/ CRs and rationalized (merged) 35 branches to improve operational efficiencies. With this, as on 31.03.2019, Bank had 6687 Delivery Channels consisting of2885 Branches, 4 Extension Counters and 3798 ATMs including BNAs/ CRs spread over 26 States and 3 Union Territories. The Bank has 44 Specialized Branches catering to the needs of the specific segments of clientele.

Population Group Wise classification of Branches

Sl. No . Category Number % to total
1 Metro 717 24.85
2 Urban 653 22.64
3 Semi Urban 764 26.48
4 Rural 751 26.03
TOTAL 2885 100

The Bank had 44 Specialized Branches, as detailed hereunder:

S.No. Category of Specialized Branches No. of Brs.
1 Specialised SME Branches 17
2 Specialised Argicultural Finance Branches 1
3 Specialised Agri -Hitech Branches 6
4 Specialised Housing Finance Branches 4
5 Specialised Personnel Banking Branches 4
6 Specialised NRI Branches 1
7 Corporate Finance Branches 2
8 Auto - Tech Finanace Branch 1
9 Overseas Branch 1
10 Asset Recovery Management Branches 6
11 Small B Branch 1
TOTAL 44

Presence in Minority-Dominated Districts: At the end of 31.03.2019 we are having 335 branches in Minority dominated Districts. Of the Banks total network across the country, the percentage of Branches in minority dominated Districts stood at 11.60 % as on 31.03.2019.

Andhra Bank Rural Development Trust: Andhra Bank Rural Development Trust is running 14 Rural Self Employment Training Institutes in A.P (9), Telangana (2), Odisha (2), & Kerala (1) states and imparting need based training for capacity building/entrepreneurial development and dissemination of knowledge to farmers, SHG women, Rural unemployed youth and artisans.Since inception, 181327 candidates have been trained through 6298 programs by the Institutes and around 79.01% of the trained candidates are engaged in gainful ventures. 50.34% of settled candidates are credit linked by the Bank branches. During the year FY 2018-19, the institutes imparted training to 9927 candidates through 387 programs. All 12 RSETIs under RSETI scheme of MoRD awarded with highest rating "AA / A" by Ministry of Rural Development, Govt. of India for the year 2017-18. NIRED Rajam (Srikakulam District, Andhra Pradesh State), one of the RSETIs sponsored by Andhra Bank received "Seva Award" from Shri E.S.L Narasimhan, Honble Governor of Andhra Pradesh and Telangana during Annual General Body Meeting of Indian Red Cross Society - Telangana State Branch.

QUALITATIVE ASPECTS :

Risk Management : The Bank had a comprehensive "Integrated Risk Management Policy" for the management of Credit risk, Market risk and Operational risk as per the guidance notes/guidelines issued by the Reserve Bank of India. The Department is preparing and reviewing the following policies on annual basis.

I. Credit Risk Rating Policy

ii. Model Risk Policy

iii. Credit Risk Data Management Policy

iv. Credit Risk Management Policy

v. Credit Risk Mitigation and Collateral Management Policy

vi. Risk Based Pricing and Performance Management Policy.

vii. Operational Risk Management Policy

viii. Market Risk Management Policy

ix. Asset Liability Management Policy

x. Integrated Risk Management Policy

xi. Integrated Investments & Forex Policy

Apart from the above, the following policies are also framed by the department :

1. Stress Testing Policy

2. ICAAP Policy

3. Disclosure Policy

4. Outsourcing policy - Non-IT activities

5. Policy on hedging of foreign currency exposures of the borrowers.

All the policies shall be reviewed annually.

Credit Risk :

• Credit Risk Management Committee is responsible for implementation of the Credit policies approved by the Board and RMC.

• The Bank has a well-defined ‘Loan Policy duly approved by the Board prescribing standards for presentation of credit proposals, financial covenants, rating standards and benchmarks, delegation of credit approving powers, prudential limits on large credit exposures, asset concentrations, standards for loan collateral, portfolio management, loan review mechanism, risk concentrations, risk monitoring and evaluation, pricing of loans, provisioning, regulatory/legal compliance, etc.

• Bank also is having in place the Credit Risk Management Policy, Credit Risk Mitigation & Collateral Management Policy, Credit Risk Rating Policy, Loan Recovery and NPA Management Policy.

• The Bank has in place comprehensive risk rating system for various categories of exposures. Bank has established a Rating cell for assigning internal ratings for all exposures of Rs 5 Crore and above. The Rating cell vets the internal rating given by the branch / Zonal office / Circle Office and assigns final rating.

• The Rating cell ensures comprehensive rating coverage, integrity of rating process and proper data maintenance.

• The Bank utilizes industry reports from CRISIL and the industry risk score service from CRISIL Research.

• Credit risk Cell is computing MCLR on monthly basis.

Market Risk: Market risk implies possibility of loss arising out of adverse movements of market determined rates and prices. The objective of market risk management is to avoid excessive exposure of Banks earnings and equity to such losses and to reduce Banks exposure to the volatility inherent in financial instruments such as securities, foreign exchange contracts, equity and derivative instruments, as well as balance sheet or structural positions. The Bank has in place a well-defined ‘Market Risk Management Policy and an organizational structure for market risk management functions. The Bank manages market risk through ‘Asset-Liability Management (ALM) policy and ‘Investments/Forex policy.

A high level Executive Committee viz. Asset-liability Committee (ALCO) oversees the ALM in the Bank and deliberates on liquidity and interest rate scenario in the market and decides upon the pricing of various products. ALCO regularly monitors the identification, measurement, monitoring and mitigation of market risk in liquidity, interest rates, equity and forex areas.

The ‘liquidity risk is measured and managed through ‘gap analysis for maturity mismatches based on residual maturity. For assets and liabilities, which are of non-maturity nature, Bank is conducting behavioural studies and factoring the observations in the gap analysis. ^e behavioural study findings are subjected to back-testing and are validated regularly. Prudential limits are fixed for net gaps and also for cumulative gap up to one year and these limits are measured and monitored regularly. Liquidity profile of the Bank is also measured regularly through various liquidity ratios and monitoring of the same is done with the help of internal limits fixed thereon.

The ‘interest rate risk is monitored on a regular basis through ‘Maturity gap analysis and ‘Duration gap analysis. Tolerance limits have been fixed for impact on Net Interest Income (NII) due to adverse changes in interest rates. To measure the impact of interest rate changes on Banks equity, duration gap analysis is done and prudential limit is set for modified duration of equity. Modified duration of equity is within the prudential limits set for this purpose. VaR and duration analysis are used for measuring market risk including treasury operations. The Interest Rate Risk in Banking Book (IRRBB) is also being assessed on a monthly basis.

Other market related risks to which any bank is exposed are foreign exchange risk on foreign currency positions, liquidity or funding risk and price risk on trading portfolios. The Bank has clearly articulated policies to control and monitor its treasury functions. The se policies comprise management practices, procedures, prudential risk limits, review mechanisms and reporting systems. The se policies are revised regularly at fixed intervals in line with the changes in financial and market conditions.

Operational Risk: Management of Operational Risk is a part of the Integrated Risk Management Policy and the Bank has a focused attention for management of the Operational Risk, in the light of the Reserve Bank of India guidelines. Operational Risk Management Cell is responsible for coordinating all the operational risk management activities of the bank and these include building an understanding of the risk profile, implementing tools related to operational risk management and working towards the goals of improved controls and lower risk. Operational Risk Management Committee [ORMC] ensures implementation and compliance of the Operational Risk policies and reports to the Board/Risk Management Committee [RMC]. The Bank has been computing capital charge for Operational risk by adopting ‘Basic Indicator Approach (BIA) as stipulated by the RBI.

Approaches followed for computation of Capital to Risk Weighted Assets Ratio (CRAR): As per RBI guidelines, all Commercial banks in India shall follow the Standardised Approach for Credit risk, Standardized Duration Approach for Market risk and Basic Indicator Approach for Operational risk under the ‘New Capital Adequacy Framework".

Credit Risk: Bank at present is following the Standardized Approach for estimation of capital requirements for Credit Risk which also includes the HTM portfolio of Investments. Bank is gearing itself to move over to Advanced approaches for Credit risk. In this regard, Bank has developed a Credit Risk Rating Model (CRRM) with the consultancy assistance of National Institute of Bank Management (NIBM), Pune. This model is further strengthened internally by making it a WAN (Wide Area Network) based CRRM model so that it is accessible from any of the locations of the bank. This model is capable of providing transition matrices and default probabilities (Probability of default) and would help the Bank in moving over to the Advanced Approaches in future.

Market Risk : Bank is using the Standardized Duration method for computing capital charge for Market risk (investments in HFT and AFS categories) as per RBI guidelines.

Operational Risk : Bank is providing capital for Operational risk as per the Basic Indicator Approach (BIA).

Preparation for moving over to Advanced Approaches : Bank is in the process of migrating to Advanced Approaches through implementation of an Integrated Risk Management Solution.

Banks compliance to RBI guidelines on Basel requirements:

Pillar - I (Minimum Capital requirements): RBI has introduced in its Basel III guidelines the following enhanced capital requirements and has also prescribed transitional arrangements to conform to these requirements in a phased manner by March 31,2020.

Regulatory Capital As % to RWAs
(i) Minimum Common Equity Tier 1 ratio 5.5
(ii) Capital conservation buffer (comprised of Common Equity) 2.5
(iii) Minimum Common Equity Tier 1 ratio plus capital conservation buffer [(i)+(ii)] 8.0
(iv) Additional Tier 1 Capital 1.5
(V) Minimum Tier 1 capital ratio [(I)+ (iv)] 7.0
(vi) Tier 2 capital 2.0
(vii) Minimum Total Capital Ratio (MTC) [(v) [(v)+(vi)] 9.0
(viii) Minimum Total Capital Ratio plus capital conservation buffer [{vii)+(ii)] 11.5

The Bank is calculating its Capital Adequacy in accordance with Basel II & Basel III guidelines. The Banks Capital Adequacy at present is in conformity with the transitional arrangements for Basel III as prescribed by RBI. However, to meet the growing business requirements, the Bank may have to supplement its Capital funds, especially by increasing Common equity in future.

Pillar - II (Supervisory Review & Evaluation Process) : In compliance with the Pillar-II guidelines of the RBI under Basel III framework, the Bank has formulated a Policy of Internal Capital Adequacy Assessment Process (ICAAP) to assess internal capital in relation to various risks that it is exposed to. Stress Testing and scenario analysis are used to assess the financial and management capability of the Bank to continue to operate effectively under exceptional but plausible conditions. The bank is calculating the Concentration risk on a quarterly basis to assess the portfolio level risks based on sectoral, geographical and borrower wise concentration. Bank is using statistical parameters like Herfindahl-Hirshman Index (HHI), Gini Coefficient, and Rosenbluth Index for determining the Credit Concentration Risk. The Bank has a Board approved Stress Testing Policy describing the various techniques used to gauge its potential vulnerability and also its capacity to sustain such vulnerability.

Pillar - III (Market Discipline): The Bank has a Disclosure Policy as per the disclosure requirements contained in the circular issued by the Reserve Bank of India on the implementation of the Basel III Capital Regulations. The guidelines therein are adhered to and compliance is reported to the Competent Authorities. Pillar-III (Market discipline) of Basel III, aims to encourage Market discipline by developing a set of disclosure requirements which allows market participants to assess key pieces of information on the scope of application, capital, risk exposures, risk assessment processes and hence, the capital adequacy of the Bank. The Pillar-III Disclosures are published on a quarterly and half yearly basis on the Banks website plus a year-end disclosure as on March of every year. The Pillar-III year-end disclosures are also published in the Banks Annual Report apart from being available on the Banks website.

In addition to the above, RBI has introduced several other measures of leverage and liquidity standards viz.

• A minimum Leverage Ratio of 4.5% to curb the excessive leverage of a banks balance sheet; and

• Liquidity standards by way of two ratios viz. Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

The LCR requires a bank to hold sufficient high-quality liquid assets to cover its total stressed net cash outflows over 30 days. The N SFR requires a bank to hold sufficient amount of stable funds to meet the requirement of stable funding over a one-year period of extended stress. The Bank is regularly calculating and monitoring the Liquidity ratios taking as reference the RBI guidelines issued for LCR and NSFR. The Bank is also calculating and monitoring the Leverage ratio on a quarterly basis.

Management of Asset Quality : Gross NPAs of the Bank stood at Rs. 28973.97 Cr as on 31.03.2019. Gross NPAs as a percentage to Gross Advances stood at 16.21% while Net NPAs as a percentage to Net Advances stood at 5.73%. The Provision Coverage of NPAs as on 31.03.2019 was 68.62%. Total reduction in NPA accounts amounted to Rs. 4425 Crore.

Position of Non-Performing Assets (Rs. in Crore)

2017 -18 2018 -19
Gross NPAs at the beginning of the year 17669.98 28124.36
Additions during the year 13864.23 5274.94
Reduction during the year 3409.85 4425.33
Gross NPAs at the end the year 28124.36 28973.97
Net NPAs 12636.87 9091.40

The segment-wise distribution of NPAs as on 31.03.2019 is as under: Segment-wise Non-Performing Assets

Segment Amount NPA % to ADV*
I. Agriculture 1718.52 4.65%
II. MSME 4890.93 14.88%
III. Retail Credit 903.57 2.20%
IV. Large & Mid Corporate 21460.95 31.62%
Total 28973.97 16.21%

*NPA% to Advances indicates NPA to Advances of that segment.

Provisions held under different classes of NPAs are as under: (Excluding floating Provisions of Rs. 13 Cr.)

(Rs. in Crore)

Nature of Asset Outstanding Provision Held
Sub - Standard Assets 4015.89 685.59
Doubtful Assets 22339.28 16530.38
Loss Assets 2618.80 2618.80
Total 28973.97 19835.22

Restructuring mechanism: During FY 2018-19, 4 accounts with outstanding amount of Rs.250.22 Cr were restructured in terms of the restructuring packages. The total balances in restructured accounts as at the end of March 2019 stood at Rs.731.31 Crore in 16 accounts.

Lending Practices: The Bank had framed well defined Loan Policy Guidelines with the approval of the Board. These guidelines are reviewed by the Board at periodical intervals based on Reserve Bank of India guidelines, Bi-monthly Policy Statement of Reserve Bank of India, competitive environment prevailing among the banks, for accelerated credit growth envisaged in certain business segments, marketing & development of new products and taking into account the feedback received from the field level functionaries, credit departments at Head Office.

Credit Committees have been constituted in the Bank at Head Office, Circle Office and Zonal Office levels for exercising sanctions of credit proposals and suitable sanctioning powers have been delegated to these committees in terms of directions of Ministry of Finance. Further, based on feedback received from field level functionaries, the delegated powers of various sanctioning authorities are reviewed and revised to reduce turnaround time in the sanction of credit proposals. The loan review mechanism is further strengthened in the Bank ensuring review of sanctions made by all functionaries by the next higher committees / competent authorities as the case may be.

Techno Economic Viability (TEV) Cell : The Bank has a Techno Economic Viability (TEV) Cell which is independent of the credit processing & sanctioning Departments. The Cell undertakes preparation of project Information Memorandum (PIM), conducting Techno Economic Viability (TEV) study and Debt arrangement (loan Syndication) for corporate clients. The cell has earned a fee based income of Rs.52.24 lakhs during the FY 2018-19.

Management Information System: Bank has developed a robust Management Information System which captures data essential for vital functions such as risk management and planning and which serves as an effective tool for the Top Management in decision making. This has facilitated quick decision making. The Bank is in a position to analyse performance in major parameters even on a day to day basis using the information system available. Leveraging on the CBS platform of the Bank, the MIS has facilitated speedy decision making and its implementation.

Inspection & Audit: During the audit year 2018-19, department has met the targets prescribed in audit plan and completed:

• 2746 branch audits were completed under RBIA against set target of2569 for FY 2018-2019.

• 149 Management audits conducted for FY 2018-2019

• 730 Limited Review of Revenue leakage audit conducted

• Compliance audits were conducted for 181 branches

• Committee approach introduced for closure of inspection reports (ZLAC and HLAC)

• Average man days in closure of inspection reports improved to 68 against 69.70 of previous year.

• 43, IS Audits were conducted during FY 2019, covering IT installations, software audits and audit of outsourcing activities.

Off Site Monitoring Cell (OSM Cell) formed based on the report submitted by Shri Basanth Seth generates the reports of high value/critical transactions happened at branches on previous day, scrutinize them and sensitize the controlling offices/Branches for taking corrective action wherever deficiencies are noticed in following the laid down systems and procedures. Besides sending the alerts, OSM cell reviews transactions based on different parameters and seek information/clarifications from branches regarding the transactions which they find critical or suspicious. O SM alerts were implemented for 91 items for better monitoring of Transactions.

Compliance Policy: The Bank has in place a comprehensive Compliance Policy. An executive of the Bank in the rank of Deputy General Manager has been appointed as the ‘Chief Compliance Officer. As per the Policy adopted by the Bank, suitable organizational structure has been laid down defining the roles and responsibilities for Compliance Officers of various departments at Head Office, Zonal Offices and Branches. Compliance of statutory and regulatory guidelines is the scope of operation of the compliance function in the Bank. Suitable reporting system is put in place to ensure effective implementation of Compliance Policy in the bank.

Legal

• SARFAESI Act: During the Financial Year 2018-19, 366 secured assets were sold and an amount of Rs. 205.57 Cr was recovered by selling the secured assets under SARFAESI Proceedings. Total cash recovery effected by the bank during the FY 2018-19 under SARFAESI Proceedings is Rs. 503.64 Cr

Lok Adalats: Recovered an amount of Rs. 71.67 lakhs in 400 accounts during the FY 2018-19.

RTI Act: 1429 Requests and 227 Appeals were received under RTI Act during the FY 2018-19. All the Requests and Appeals were disposed off on time.

Customer Service : Bank received 1,01,883 complaints through various channels viz. Public Grievance Redressal System (Portal), Banking Ombudsman and Departments like NEFT Cell, RTGS, Credit Card, CPPC, Retail Credit, MSME, MBD, Priority Sector, ATM Cell, Marketing & HR (outsourced complaints) and SMS Upset system during the year 2018-19 and resolved 1,01,809 (99.92%) complaints. As on date all the pending complaints pertaining to the year 2018-19 have been since resolved.

Bank received appreciation from the O/o Banking Ombudsman for NIL pendency of complaints lodged during the year.

Bank Implemented Policy on customer protection-Limiting Liability of customers in Unauthorised Electronic Banking Transactions.

Complaints lodged through Public Grievance redressal System Portal have been resolved in an average time period of 6 days as against the prescribed time frame of 21 days.

Human Resources Management

Manpower Planning : To augment the existing manpower, 523 general officers and 595 clerks were inducted during the financial year 2018-19.

Induction of new recruits : trough revised PO-on boarding system, the newly recruited probationary officers are provided intensive trainings. Competency mapping is done by closely monitoring these POs duly carrying out skill mapping exercise during the training programs conducted at our Apex College.

Career Progression: Bank ensured career progression by initiating the process for 1033 promotions in all cadres for the year 2019-20. The entire promotion exercise has been initiated in time and is under progress.

Skill Up gradation & Training: With an objective to improve the core capabilities and competencies of employees on product awareness soft skills development and to bridge the skill gaps in key areas like Credit appraisal, Credit Monitoring/follow up, Recovery, Risk Management, Forex, IT., etc, various training programmes were conducted and provided in-house training to 10485 employees. With an aim to enhance the knowledge and productivity levels of the officers, 316 Officers were nominated for external trainings conducted by reputed institutes like NIBM, RBI-CAB, IDBRDT & FEDAI, in addition to the regular trainings conducted at our Apex College Hyderabad and STC Visakhapatnam. In addition, 8 Officers were also sent to external programmes conducted abroad.

E-learning : For ensuring extensive reach of learning facility and to develop a learning culture among all staff members, Bank has developed an E learning portal for updating their professional knowledge. Around 200 e-lessons are uploaded into this portal. Besides this, periodical on line tests on different subjects are being conducted for continual up gradation of skills of employees.

Industrial Relations : With a view to maintain cordial Industrial relations in the bank and to sort out the issues to enhance the working conditions as well as customer service, Quarterly meetings were held with the representatives of the recognized Officers Federation and the Award Employees Union.

Succession Planning : As part of succession planning initiative, Bank has created a talent pool in various grades and these officers are groomed by providing intensive training programmes on various fronts, to occupy the top key posts in the years to come. As per the Capacity Building Policy, it has been made mandatory for certification of the staff manning key functional areas, besides encouraging Officers to acquire certifications in other functional areas also. As a part of reforms Agenda for PSBs, Government has issued certain guidelines under the theme called "EASE - Enhanced Access & Service Excellence." One of the Action Points of EASE relates to introduction of Job Family Concept, whereby the different roles in the Bank are appropriately identified and allocated, which ultimately result in building up specialisation / expertise in personnel. As advised, Job Family concept has been introduced and all the Officers have exercised their options so as to enable the Management to effectively utilise these Officers.

HR Digitalisation : Our Bank has initiated implementation of various online staff related modules on par with other Banks, viz., online submission of Assets & Liabilities statement of officers, submission of leave applications, employee profile view, job families etc.

Mentoring: The mentoring concept designed with an objective to imbibe our Banks culture, systems and procedures etc among the new entrants, has been successfully implemented. As an initiative, 15 mentors are identified to groom 75 selected mentees at select places.

Staff Strength as on 31.03.2019 :

Category Strength % to total
Officers 11484 56%
Clerks 5825 29%
Sub Staff* 3037 15%
Total 20346 100%

^Excluding Part Time Sweepers.

SC/ST/OBC Profile : Our Bank has been implementing reservation policy for SCs & STs as per Government of India guidelines. The representation of SCs and STs is 4217 and 1774 respectively in total workforce of 21403 working in the Bank as on 31st March 2019. Out of the total of 11484 Officers, 2010 belong to SC category and 1018 belong to ST category. Bank has nominated a General Manager as Chief Liaison Officer for SCs & STs at Head Office to ensure proper implementation of Government guidelines on reservation policy in the Bank. Bank has nominated all the Zonal Managers as Liaison Officers for SCs & STs at Zonal level to address the grievances, if any, of SC & ST employees. Bank has been conducting Quarterly Joint Meetings with the representatives of "Scheduled Castes & Scheduled Tribes Employees Welfare Association of Andhra Bank". Our Bank has been implementing reservation policy for Other Backward Classes (OBCs) with effect from 08.09.1993 as per Government of India guidelines. The representation of OBCs is 6051 out of the total work force of 21403 working in the Bank as on 31st March, 2019. Bank has nominated a General Manager as Chief Liaison Officer for OBCs at Head Office to look after the reservation and other welfare matters related to OBCs. Bank has nominated all second line executives at Zonal Office as Liaison Officers for OBCs at Zonal level to address the grievances, if any, of OBC employees. Bank has been regularly conducting Half Yearly Joint Meetings with the representatives of "All Andhra Bank BC Employees Welfare Association".

Differently Abled Persons : As per Government of India guidelines, our Bank has provided 3% reservation to the Persons with Disabilities in direct recruitment to all Group of posts, of which one per cent each reserved for persons suffering from (i) blindness or low vision, (ii) hearing impairment and (iii) locomotor disability or cerebral palsy in the posts identified for each disability on horizontal basis till 18.04.2017. As per the new Act ‘"tte Rights of Persons with Disabilities Act, 2016, came into force with effect from 19.04.2017, and as per the directions received from Department of Financial Services, Ministry of Finance, Govt. of India, New Delhi, Bank has been providing reservation for Persons with Disabilities at the rate of 4% of the total vacancies identified in all cadres, of which one per cent each shall be reserved for persons with benchmark disabilities under clauses (a), (b) & (c) and one per cent for persons with benchmark disabilities under clauses (d) and (e), namely;

(a) blindness and low vision;

(b) deaf and hard of hearing;

(c) locomotor disability including cerebral palsy, leprosy cured, dwarfism, acid attack victims and muscular dystrophy;

(d) autism, intellectual disability, specific learning disability and mental illness;

(e) multiple disabilities from amongst persons under clauses (a) to (d) including deaf-blindness in the posts identified for each disabilities.

^e representation of Persons with Disabilities is 648 (3.02%) out of the total workforce of21403 as on 31st March, 2019.

Economically Weaker Sections (EWSs): As per Govt. of India guidelines, the persons belonging to EWSs who are not covered under the scheme of reservation for SCs, STs and OBCs shall get 10% reservation in direct recruitment in civil posts and services in the Government of India, subject to family income and assets specified therein with effect from 01.02.2019. Accordingly, our Banks Board approved to implement the Government of India guidelines on reservation for Economically Weaker Sections (EWSs) in all our ensuing recruitment processes.

OFFICIAL LANGUAGE : Rajbhasha Link in AB Staff Portal has been revamped. Besides Rajbhasha Mission, Banking Terminology, Administrative Phraseology, Rajbhasha Margdarshika, various formats, Important Circulars, other related information, Hindi House Magazine, Monthly Hindi e-bulletin, Annual Action Plan, Daily Hindi Word, bought for the week and Hindi Workshop material etc have also been kept in our Portal. Head Office was awarded First Prize in Use of Hindi in Hyderabad by Ministry of Home Affairs and the Bank has won 40 prizes in inter-bank TOLIC Hindi competition.

VIGILANCE:

As part of the Central Vigilance Commissions initiative, Vigilance department conducted Workshop on Best Practices in Preventive Vigilance & Systemic Improvements introduced in the Public Sector Banks on 08.02.2019 at Hyderabad for South based Public Sector Banks. Managing Directors/ Executive Directors and Chief Vigilance Officers of all the seven South based Banks participated in the workshop. (Andhra Bank, Canara Bank, Corporation Bank, Indian Bank, Indian Overseas Bank, Syndicate Bank and Vijaya Bank).

• Online Complaint Registration Mechanism (OCRM) - [Whistle Blower Mechanism] devised by Vigilance Department was recognized by Central Vigilance Commission for adoption by other Banks and published in its "Preventive Vigilance Initiatives" book.

Devised a new Preventive Vigilance tool "Whistle Blower on SMS" to strengthen the Whistle Blower Mechanism to lodge a complaint by sending an SMS to a designated virtual mobile number. The mobile number of the sender will not be displayed.

Appended a chapter on Vigilance matters in the Banks Handbook on Useful information for the benefit of all the employees which contains information on procedure for lodgement of complaint with CBI / Police, handling complaints, common irregularities / lapses observed in operations and advances etc.

Introduced "Case Profile" for reviewing the IAS reports. A sheet containing the details like date of NPA, Initiation of IAS, Review of IAS at each level i.e. at ZO, CO, HO as the case may be, clarifications sought and final note put up to CVO are recorded in each IAS report. This enables ensuring timeline at each stage.

CVO visited 18 Zones during the FY 2018-19 and interacted with Executives and staff of Zonal Office along with heads of large branches and discussed on certain critical parameters to ensure probity, fairness and transparency in the Bank.

Vigilance Appraisal - Vigilance Excellence Award: Performance of Zones is assessed in respect of vigilance compliance and other key factors in a structured format containing 25 parameters. Top 3 Zones will be identified and awarded "Vigilance Excellence Award".

In the current financial year, 10684 number of employees were enlightened on Preventive Vigilance aspects in 484 different training programs/sessions held at Apex College-Hyderabad, Staff Training College - Vishakhapatnam and Zonal Offices.

Department is broadcasting messages on Morals & Ethics and Vigilance Angle through SMS to all employees to inculcate Vigilance Culture.

Chief Vigilance Officer interacted with the participants of various programmes at Staff College on Vigilance Compliance and Vigilance related matters.

Officers of Vigilance Department and staff from controlling offices and branches are being deputed to External Training Programmes on Vigilance related matters.

Performance Highlights - Operations

Department has devised a module enabling all the officers for submission of statement of A&L online as on 31st March of every year, which would enable timely submission and creation of data base.

Department has achieved the target of reviewing Assets & Liabilities statement of officers staff.

Department received 170 complaints out of which 155 complaints were disposed off during the year.

At the beginning of the Financial Year 92 Vigilance Cases were outstanding. During the year 151 Vigilance Cases have been registered and 149 cases have been disposed off.

Department referred 144 cases to HR-IR for initiating Regular Departmental Action under Non-Vigilance wherein 230 staff members were found accountable.

Preventive Vigilance Inspection has been conducted in all the branches of the Bank to ensure implementation of Systems & Procedures.

Department received 815 IAS Reports/FRMG Note/Special Reports during the financial year 2018-19 out of which 664 Reports were disposed off.

Fraud Review Council (FRC) meetings are conducted every quarter to review the frauds taking place in the Bank and its modus operandi. Appropriate suggestions for systemic improvement and corrective measures are advised to the concerned departments for required action and follow up.

During the Vigilance Awareness Week 2018 (October 29, 2018 to November 03, 2018), with the theme "Eradicate Corruption - Build a New India", Bank has conducted 4478 Awareness Gram Sabhas across the country where more than 111405 citizens participated. Essay Writing/Elocution/Debate competitions were organized in schools and colleges. Walkathon & cyclothon were organized at Hyderabad and other places. A free medical camp was also organized at Hyderabad. An online test on Preventive Vigilance Measures was conducted where 4627 staff members have taken the test.

Publications

• Published a booklet on the Key Best Practices in Preventive Vigilance & Systemic Improvements in Public Sector Banks for

circulation among the PSBs and for adoption in their Banks.

• News Bulletin "SAVDHAN" is being published quarterly for updating the staff with the latest information on frauds and preventive measures to safeguard themselves and the Bank.

" The Right Direction - A Key Note from CVOs desk" is being circulated to all branches and offices of the Bank to ensure enhancement of Vigilance Culture and Vigilance Compliance level in the Bank.

LEAD BANK SCHEME: Andhra Bank is having Lead Bank responsibilities in fifteen districts, viz. Srikakulam, East Godavari, West Godavari, Guntur in the state of Andhra Pradesh; Ganjam, Gajapathi districts in Odisha state & Siddipet, Sircilla Rajanna, Jagtial, Peddapally, Mancherial, Wanaparty, Nagarkurnool, Jogulamba Gadwal, Warangal rural in Telangana State. Bank is discharging the responsibilities in implementation of Lead Bank Scheme in all these districts.

Andhra Bank is the Convener Bank for State Level Bankers Committee, Andhra Pradesh since 1984. Consequent to re-organization of AP into Telangana & Residual Andhra Pradesh w.e.f. 2nd June, 2014, responsibility of Convenership of SLBC of residual AP continued to be with Andhra Bank.

So far 206 SLBC meetings have been organized in the state of Andhra Pradesh. During the current year, SLBC has conducted various meetings involving RBI, NABARD, Bankers and Govt. Agencies. Besides these meetings, the Convener, SLBC has participated in various meetings and Video Conferences that are being organized by Government of India, Government of Andhra Pradesh, RBI and NABARD.

^e State Credit Plan for AP for FY 2018-19 was launched by the Honble Chief Minister of Andhra Pradesh during 203rd SLBC Meeting on 13.07.2018. SLBC is coordinating with all stakeholders and has been proactive in implementing Annual Credit Plan and other initiatives of Central & State Governments. During the year 2018-19, SLBC of AP actively involved in implementation of Gol initiatives namely Gram Swaraj Abhiyan (GSA), Extended Gram Swaraj Abhiyan (EGSA) and MSME Support & Outreach in selected districts of Andhra Pradesh.

APSLBC CALL CENTRE: SLBC has established a Call Centre namely APSLBC CALL CENTRE on behalf of all Banks in the state with toll free telephone Number 18004258525 and an exclusive toll free number 18004251525 for MUDRA. Website: An exclusive website is set up for SLBC of Andhra Pradesh with URL www.slbcap.nic.in for information of all the stake holders and general public. The website is being updated at regular intervals with the latest data and information.

FINANCIAL INCLUSION:

During the FY 2018-19, the Banks achievement against the set targets under Financial Inclusion schemes is given below

Particulars Target Actual % of ach.
PMJDY Accounts 6,56,000 3,39,387 52.84
Issuance of RuPay Cards 6,56,000 2,01,498 23.67
Sanctioning and Disbursement of OD No target 66,064 --
Coverage under Social Security Schemes 6,00,000 1,31,319 21.83

Aadhaar Seeding: Bank has achieved 78.20% of Aadhaar seeding and 69.58% in Aadhaar Authentication in active CASA accounts.

Atal Pension Yojana (APY): The Bank has enrolled 2,23,454 APY accounts during the year with average of 76 accounts per branch against a target of 1,73,220. The Bank has received an incentive of Rs.3.95 Cr of which 1.99 Cr towards fresh enrolments, Rs. 0.23 Cr towards volume based additional incentive and Rs. 1.72 Cr. towards persistency incentive.

Establishment of Aadhaar Enrolment Centres: DFS, Ministry of Finance, Govt. of India has advised all Banks to establish 1 enrolment centre for every 10 branches. As per existing branch network, Bank needs to establish 290 enrolment centres PAN India. Accordingly Bank has established 290 Aadhaar enrolment and updation centres and achieved 100% target.

• Our Vashi branch in Maharastra state has received Best Performing Branch award from UIDAI for registering highest number of enrollments.

• Bank has received capital incentive claim of Rs. 2.11 Crores form NABARD towards establishment of265 Aadhaar Enrollment Centres as on 31.03.2018.

Financial Literacy and Credit Counselling Centers: 3 FLCCs one at Sirguppa in Karnataka state, one each at Jagtial and Siddipet in Telangana state started operations. With this bank is having total of 11 FLCCs functioning and are providing services.

Bank Mitra Facilitators: As number of Bank Mitra activities are increasing on day to day basis, Bank has appointed Bank Mitra Facilitators in 8 Districts of Andhra Pradesh, 4 districts in Telangana and in 3 Districts of Odisha State.

Gram Swaraj Abhiyan (EGSA): Under this programme DFS has identified about 48,503 villages having above 1000 population for conducting campaigns to provide universal coverage under financial inclusion related schemes such as PMJDY, PMSBY & PMJJBY. Of 117 identified aspirational districts, our Bank presence is in 35 Districts under which 341 villages exist. Bank has exceeded the set targets under this campaign as indicated below.

PMJDY

PMSBY

PMJJBY

Target Achiev

ement

% of Achiev ement Target Achiev

ement

% of Achiev ement Target Achiev

ement

% of Achieve ment
28,263 31,335 110.87 33,657 34,996 103.98 20,233 21,439 105.96

SUBSIDIARIES & REGIONAL RURAL BANKS : The Bank has one Subsidiary, namely, Andhra Bank Financial Services Limited (ABFSL), which is wholly-owned by the Bank. The Company has earned a profit of Rs 127.04 Lacs before Income Tax and a Net Profit of 91.80 Lacs after Income tax during the year ending 31.3.2019, with this the accumulated losses of the company has been brought down from Rs 572.36 Lacs to Rs 480.56 Lacs as on 31.03.2019. Bank has one sponsored Regional Rural Bank namely Chaitanya Godavari Grameena Bank located in Guntur (Andhra Pradesh), covering the districts of Guntur, East Godavari and West Godavari with 218 branches. As on 31.03.2019, the total business stood at Rs.9080.49 Crore, and Net profit after Tax is Rs.71.71 Crore. Percentage of Gross NPA to Average Advances is 1.00%.

SECURITY ARRANGEMENTS : Bank has upgraded the security arrangements at branches, currency chests and ATMs. All branches in the Bank are provided with CCTV system for video surveillance. Conventional alarm system at 99 % branches have been upgraded to Integrated Intruder Burglar Alarm System (IIBAS). Centralized Alarm Monitoring Station has been established in Head Office for 24X7 monitoring of Integrated Intruder Burglar Alarm System installed in branches. 40 % of branches have already been integrated to CAMS at Head Office and are being monitored continuously. Integration of balance branches is in progress. State of Art integrated e-surveillance system has been provided in 88 % of the ATM Sites and Bank has reduced revenue expenditure to the tune of approximately 68 Crores per Annum, by replacing physical guarding with e-surveillance at these sites. Installation of e-surveillance system at balance sites is in progress. All efforts are on to ensure that all security gadgets are maintained in working condition at all times and minimize crime incidents against Bank.

NRI CELL: The NRI Cell was set up with a view to serve as an effective channel of communication between the Bank and its NRI Clientele thereby increasing NRE Deposits. The Cell supports and guides the branches & Representative Office in Dubai thereby ensuring betterment in Customer Service. During the Financial year, the Bank has closed its representative office in New Jersey. NRI Cell provides useful information related to Banking & Foreign Exchange to NRIs through NRI Bulletin (AB Connect) every month. At present nearly 54991 NRI Customers (both existing and prospective) are being connected and accessing the information provided in the NRI Bulletin (AB Connect). Total NRI business of the Bank of the Bank stood at Rs. 3403 Cr as on 31.03.2019.

BRANDING AND COMMUNICATIONS: The Bank has undertaken publicity & branding during the financial year to derive good mileage and visibility for the Bank. Some of the major publicity activities include,

• Utilization of Ad Space (Big hoarding) at Nizam Club, Hyderabad for publicity on our products.

• Advertisement in Sri Venkateswara Bhakti Channel (SVBC) during live programmes.

• Exhibiting of our ADs on Bus Shelters, Central Medians at different places.

• Putting up of Banks Stall at All India Industrial Exhibition at Hyderabad which run for 45 days.

CORPORATE SOCIAL RESPONSIBILITY (CSR): As the Bank reported loss for the year ending March, 2018, there was no budget allocation for Donation which includes CSR activities for the financial year 2018-19.

BANKS WEB SITE: The Bank maintains its website www.andhrabank.in in three languages, viz., English, Hindi and Telugu for providing information about the Bank, its services and products offered. The Bank has made its WCAG (Web Content Accessibility Guidelines) website accessible to ‘visually impaired persons, as per Government of India guidelines. The Bank being the Convener of State Level Bankers Committee, Andhra Pradesh, maintains separate website www.slbcap.nic.in. This website communicates all the proceedings of SLBC Meetings, State Government directives, instructions to Bankers and public. The Bank follows meticulously CERT-In (Indian Computer Emergency Response Team) guidelines issued from time to time in maintaining Banks Website securely.

AWARDS AND REWARDS: The bank received the following awards during the FY 2018-19:

IBA Banking Technology Awards-2019-Our Bank has won 4 awards at IBA Banking Technology Awards-2019- viz., The Best Technology Bank of Year-Winner, The Best Financial Inclusion Initiatives-Runner up, The Best Payments Initiatives-Runner up and The Most Customer Centric Bank using Technology-Runner up.

Infosys Finacle Client Innovation Awards 2019- Our Bank has won 3 awards at Infosys Finacle Client Innovation Awards 2019 - viz., ‘Process Innovation-Winner, ‘Accelerated Transformation-Runner up and ‘Emerging Technologies Led Innovation-Runner up.

Awards under APY : Bank got the following awards in campaigns announced by PFRDA

• Bank has been awarded as the "Second Best Performing Public Sector Bank" from PFRDA for the FY 2018-19.

MD & CEO of our Bank was awarded in APY "Leadership Capital" campaign by PF RDA.

Makers of Excellence - Executive Director of our Bank has been awarded as best Executive Director under APY.

APY - Splendid 7 - General Manager FI of our Bank has been awarded as Best Performing General Manager under Major Banks category.

APY - Passion for Performance - Nodal Officer - FI of our Bank has been awarded as best performing Nodal Officer under

APY.

Special Recognition Award for Excellent performance in " AePS by NPCI" in "B" Category banks.

Indian Accounting Standards (Ind AS) - Progress: Implementation of Indian Accounting standards (Ind As) has been deferred till further notice, vide circular No. DBR. BP. BC. No. 29/21.07.001/2018-19 dated March 22, 2019. Bank shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting period ending 31st March 2019 and thereafter in accordance with the guidelines of Reserve Bank of India. In order to facilitate smooth transition to the application of Ind AS , Bank is in the process of identifying the changes required to be made in the IT system & other policies to comply with Ind AS.

CHANGES IN THE BOARD DURING THE YEAR: The following changes took place in the Composition of the Board during the FY 2018-19:

• Shri J Packirisamy, assumed charge as MD& CEO on 21.09.2018.

DIRECTORS RESPONSIBILITY STATEMENT: ffie Board of Directors hereby state that

• The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

• Accounting policies have been selected and applied consistently, reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Bank as at 31.03.2019 and of the profit and loss of the Bank for the financial year ended on 31.03.2019.

• Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the relevant regulatory provisions for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

• The annual accounts have been prepared on a going concern basis.

• Internal Financial controls to be followed by the Bank have been laid down and such internal financial controls are adequate and are operating effectively.

• Proper systems have been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

ACKNOWLEDGEMENT: Andhra Bank is grateful to the Government of India, RBI, SEBI, NABARD, and other authorities/agencies, Financial Institutions and Correspondent Banks for their valuable support and guidance. The Directors also express their deep sense of appreciation to all the staff members of the Bank for their dedicated service, outstanding professionalism and commitment towards Banks vision for a sustainable growth. Finally, the Directors wish to sincerely thank all the customers, shareholders and other stakeholders for their valuable support.

For and on behalf of the Board,
Place : Hyderabad (J Packirisamy)
Date :13.05.2019 MD & CEO